Mon 19 Aug 2013 07:44:14 CT
October cattle pushed up to the highest level since early April on Friday and also reached the 50% correction mark of the Dec to May break before closing lower. The reversal and weak technical action in October futures clashes with the bullish technical action for February cattle which experienced a new high for the move and a new high close for the move. The market saw volatility on news that US drug maker Merck said it would temporarily suspend sales of Zilmax due to concerns for animal health. While less Zilmax might cause weights to drop, many traders saw the news as neutral to bearish. Many producers will just switch to competing weight-enhancing drugs. Since only one of this type of drug is under scrutiny, there is no longer a concern that cattle weights will drop off rapidly in the weeks just ahead. However, Zilmax was seen as the product which boosted weights the most and many traders see some drop in weights as a positive. December cattle pushed up to the highest level since March 13th into the pit opening and then fell as much as 152 off of the highs into the mid-session. The choppy trade continued with October closing 17 lower on the day and December closing up 17 and February up 60.
Higher beef prices and ideas that cash might trade higher on the week helped to support the early bounce. Cash in Kansas and Texas came in at $123.00, up $2.00 from the previous week. Packers seem to have little difficulty in obtaining market-ready cattle in recent weeks and many traders see ample supply for another 4-6 weeks before numbers begin to tighten again. The premium structure of the market plus continued use of growth-enhancing drugs suggests weights and production could rise ahead. Average dressed steer weights for the week ending August 3rd came in at 866 pounds, up from 862 the previous week and last year. The 5-year average weekly weight is at 847.8 for this time of the year.
The estimated cattle slaughter came in at 116,000 head Friday and 23,000 head for Saturday. This brought the total for last week to 617,000 head, down from 633,000 the previous week and down from 643,000 a year ago. Beef production for the week ending August 17th came in at 490.6 million pounds, down 2.4% from the previous week and down 3.7% from last year. Boxed beef cutout values were up 69 cents at mid-session Friday and closed $1.09 higher at $194.39. This was up from $188.99 the prior week and is the highest beef market since July 8th.
The Commitments of Traders reports as of August 13th showed Non-Commercial traders were net long 50,451 contracts, an increase of 19,690 contracts for the week and the aggressive fund buying trend is seen as a short-term positive force. Non-Commercial and Nonreportable combined traders held a net long of 40,414 contracts, up 17,067 for the week. Specs are no where near the record net long position of 97,560 contracts.
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